Jtc Share Discussion Threads

[the stigologist] 04/7/2018 09:49

AOR

These are the excerpts from the recent broker note. Have to suspect this is now in advanced stages...

A £2.5m annual royalty would be valued at a PE ratio of 25-50 times I suspect. i.e. we'd be looking at a Market Cap of £62.5-125m just on the Breast IP ! (ARM was valued at 50-100x PE on its Royalty income)



"A leading device manufacturer is investigating using AorTech's technology for its next generation products.

Development plan
AorTech is in the early stages of an investigatory programme with a breast implant business that has identified the opportunity to develop new technology to drive its business in the future.

Opportunities for Aortech
This project requires little investment by AorTech but, if successful, would result in either a very attractive licence and royalty income or a JV opportunity to disrupt current technologies and supply chains. Not assumed in our projections, but as an indication of the potential value is that a 5% royalty on a 5% global market share would generate an income stream of £2.5m per annum to AorTech."

[aleman] 04/7/2018 09:38

JTC - I read somewhere that there is lots of cash and lots of debt, the problem being that it is a few of the biggest tech stocks that have lots of cash and everyone else in the normal economy that has lots of debt.

[jtcod] 04/7/2018 08:21

I am all for buybacks when a) a company if cash rich b) they have no worthwhile, safe alternative to drive earnings and c) the best ROE on offer comes from buying their own stock because it is on a single digit PE.However, a) Corporate America is up to its collective neck in debt, b) Debt interest rates are rising fast and c) the S&P500 is on a PE of 25 and a Schiller PE10 of 32 the second highest spike in history!Buybacks are Corporate madness right now. I suspect though that if they were to wait just a little bit longer............:-)

[zho] 04/7/2018 08:05

US corporate debt: John Mauldin quotes figures from one of the investment banks claiming that 80% of corporate debt taken on in the last 10 years has been used for financial engineering - buying back shares to boost earnings, and therefore share prices, and director bonuses linked to share prices.

[chestnuts] 04/7/2018 07:54

Aleman

Welcome back its glad to see you posting again, the Dow as an upside down pennant target 22765 ish but can go further as its a continuation pattern.

[blusteradjuster] 04/7/2018 07:51

Staggering numbers JTC.

It seems governments, corporations & individuals spent tomorrow - and many days beyond that - already.

Utterly reckless.

The end-game would surely be some kind of reset - but that won’t be without huge impact on society.

[jtcod] 04/7/2018 07:46

The figures in that article are so big that I just had to check them out for myself. "........as corporations find little else to do with their $2.1 trillion in cash"How about pay some of your debt?..........."Dow components Nike and Walgreens Boots Alliance led the most recent surge in buybacks, with $15 billion and $10 billion, respectively, last week."So far I am not seeing the same picture as the one painted of US companies swimming in cash.......Walgreens - May 2018: Cash $1.8bn, Debt $15bnNike - Feb 2018: Cash $3.7bn, Debt $3.5bnI will continue digging but it may be a case of Corporate America cash $2.1 trillion, debt $6 trillionhTTps://fred.stlouisfed.org/series/NCBDBIQ027S

[aleman] 04/7/2018 00:20

I apologise if I have broken the flow and if this jaw-dropping item has already been covered.

Private US investors sold down in Q2 but corporate buyers went bonkers thanks to Trump's tax changes. Where would the drifting Dow have been without this madness?



Companies announced $433.6 billion in share repurchases during the period, nearly doubling the previous record of $242.1 billion in the first quarter, according to market research firm TrimTabs. ...

... At the same time, investors dumped $23.7 billion in stock market-focused funds in June, also a new record. For the full quarter, the brutal June brought global net equity outflows to $20.2 billion, the worst performance since the third quarter of 2016, just before the presidential election. The selling is particularly acute in mutual funds, which saw $52.9 billion in outflows during the quarter and are typically more the purview of the retail side.

[aleman] 03/7/2018 23:37

Thread went to pot. Gave up on it. Good to see it has become informative again. I think there will soon be a great deal more to discuss, as if there was not already enough.

[jtcod] 03/7/2018 23:30

Blimey Aleman not heard from you in a while. Almost like old times there for a moment! :-)Thanks for the posts btw. China's corporate sector looks a hell of a mess right now.

[aleman] 03/7/2018 17:35

US 2-10 spread now 2.54-2.84 so another post recession low of only +0.30%.

[aleman] 03/7/2018 17:32

Increasing volatility and a lack of bounce off a flattening 200-day average should be seen as worrying trends in the Dow. It probably just needs one more piece of bad news to flick all the computers into sell mode as the 200-day gives way. This is the 7th day of battle between bulls and bears around the 200-day average. Place your bets. What are the odds of Trump keeping his gob shut AND the Fed pausing on rate rises?

[aleman] 03/7/2018 17:31

Check out graph of junk bond yields in China. Maybe not as badly, but liquidity will be drying up similarly elsewhere in emerging markets and it is likely to spread unless central banks and Trump change policies.




Meanwhile, the US Treasury yield curve flattened to a new low of +0.31% as measured by the difference between yield on 2 years and 10 years. Bond markets' disagreement with the Fed about prospects is intensifying.

[aleman] 03/7/2018 17:26

Fed policy is causing problems for itself and banks. Interbank liquidity is drying up. Is it losing control as its short rate policy conflicts with (the amount of) Quantitative Tightening, Trumps exploding deficit and bank reserve regulations?

[jtcod] 03/7/2018 15:58

Yes, he is a bit of an oddball but perfectly suited to that work I would think MT.

[mount teide] 03/7/2018 15:46

Corporate Fraud/Money laundering is such a big problem in the US - Madoff whistleblower Harry Markopolis gave up hedge fund management to become a corporate investigator after the US Government incentivised investigators/ whistleblowers by offering a large percentage of the recoveries from any fraud/tax evasion/money laundering scam they find and report.

Apparently, Harry is doing very well - specialising currently on the US Insurance industry, which he said is riven with such activity and its fair share of Ponzi schemes.

[jtcod] 03/7/2018 15:16

Tbh I would love to work in the detection of money laundering. I would get a lot of enjoyment in catching these people who rip off their own citizens and the their tax office. I think the UK Tax office though is so slow to see obvious signs. There are people who earn a living just facilitating money laundering frauds. It is naive to think they are looking for a needle in a haystack. If the tax office found just one such company I bet they would find 50 or 100 copy companies. All with the same officer in charge, all showing zero turnover and subsequently closed off after the laundering is completed with the declaration 'non traded company'. Just check all you 'non traded' closed companies at Companies house would be a starting point. Look for the highest number with the same officer in charge.Leading nations of the world should make it law that all international banks doing business with their country should be required to inform of any new bank account opened for a company via the tax office of jurisdiction. It should be part of international law. Failure to do so would result in cutting them off from the world banking system. That would reduce money laundering hugely.

[jtcod] 03/7/2018 13:55

Glencore money laundering probehTTps://www.bbc.co.uk/news/business-44695262I bet the shareholders are pretty unhappy about this and so they should be. Unhappy with the management that is, rather than the US authorities. Shareholders in the O&G and Mining industries need to sit up and take notice imo because this is going to be a more common event from now on and those sectors are up to their necks in it imo. Ever since the FIFA arrests it was plain as day that US authorities now had some very open cooperation with off-shore jurisdictions. This came about I believe from negotiations on tax issues following the financial crises. I took legal advice on this subject from a well respected authority on the money laundering act and it didn't leave me very positive I can tell you.Let's use just one scenario:A company decides to bid for an exploration license in a foreign jurisdiction and in preparing for the bidding process their local advisers tell them it would be advantageous to team up with a local firm whom they recommend. Sometimes the local firm is just a new company with no outwardly obvious credentials in that field. The directors suspect corruption but let's face it, in these sectors the prevailing attitude is "what you don't know won't hurt you". They want the exploration contract because with the contract comes the ability to raise capital and with the ability to raise capital comes the ability to pay themselves not insignificant remuneration. The partnership is setup and as usual the partner company will be domiciled in BVI, or Caymen or Panama you know the form and with banking probably in Latvia or something similar. Now here's the rub: There is a fundamental law that must be adhered to at all times - 'Know Your Customer' and this is an all encompassing law. It covers Partners, customers, middle men in fact anyone you have financial dealings with. You must have a file for each and every one but unfortunately unless you actually have proof, in copies of the company articles, shareholder register and acting officers of this company and check them out, you as a Director will be complicit in the money laundering fraud should it be proven. Now I can tell you that it is 99.9% impossible to obtain that information unless it is given to you voluntarily and anyone running a fraud is obviously not going to give you that data. That's why they set it up offshore in the first place. My understanding is that companies rarely ask for proof because they are too frightened to lose the opportunity of an exploration contract. Btw, don't think the big boys are any more vigilant either. They aren't, as Glencore clearly shows.There are very many variations to this theme. Sometimes it starts as an agreement to issue a chunk of your own shares to a company or person and or put someone on the board to assist fraudulent parties. Unfortunately it is pretty much part and parcel of doing business in foreign jurisdictions for oil companies and miners.The problem for investors is that they get caught in the crossfire. It's not just the directors at risk here either, it's the exploration contract too. This is why I will no longer invest in those sectors.As ever all IMHO and DYOR

[jtcod] 03/7/2018 08:48

I guess it comes down to the level of risk to the system. When the risk is critical everything falls (bar phosphates it seems :-) so 2008 and 1929 are classic examples of risks to the system. Copper fell 60% on both occasions. However as you point out normal peaks and troughs do not necessarily need to align and often don't.100 year chartshTTp://inflationmonkey.blogspot.com/2012/05/copper-price-is-as-expensive-as-it-was.html

[mount teide] 02/7/2018 23:20

The very kind(for England) football world cup draw suggests England probably have their easiest route to a semi-final or final since 1966.

Of the three teams between England and a semi final place - all three are rated the biggest outsiders to win the competition outright by the bookies of the 10 teams left in the competition.

Of the four teams left in the other half of the draw, three are the market favourites to win the competition outright.

If England make it to the semi-final they will then face either Russia or Croatia for a place in the final - both priced at higher odds than England to win the competition outright.

The bookies today installed England in the top 4 to win the competition - presumably as a result of England's good fortune of avoiding any of the other three favourites until the final, should they get that far.

Having an earliest memory of watching England win the World Cup on a very fuzzy Black and White picture 17 inch Murphy Valve Television - watching this world cup in 4K/Ultra HD on a large screen wall mounted TV, its easy to forget how far the television viewing experience of live sport has progressed over the past 50 years.

[mount teide] 02/7/2018 21:21

Interesting post JT.

My copper sector research covering a period of over 50 years found that equity market peaks and troughs regularly have periods of diametrically opposite peaks and troughs to the copper market.

COPPER:
'Q2 2007 $3.25 then rise to $4.10 by Q1 2008 and fell to $1.30 by Q4 2008
This Copper bull run started from 2002'

Once the fear that the entire global banking system was not going to crash - within 18 months Copper more than tripled to set a new commodity cycle high of $4.50, while the FTSE was still in significant correction territory some 20% below its previous peak.

The previous global equity market peak in late 1999 saw the FTSE hit circa 7,000 while copper was at a 15 year low of $0.78.

The FTSE then tanked eventually bottoming in H1/2003 nearly 50% down, and by mid 2006 was still some 20% down. The Copper price during this entire period never dropped at all and by mid 2006 had risen by 375% to $3.70(some 493% better than a comparable investment in a FTSE tracker during that period)

From 2010 to Q1/2016 copper dropped 58% while the FTSE went largely sideways to finish at exactly the same level as 6 years before. Since then the FTSE is up 35%, while Copper is up 55%.

With the copper market forecast to go into a period of material deficit for most of the next 5 years and still 50% below its previous 2010 high, and the FTSE close to an all time high valuation - the likely trend in comparative valuations over the medium term looks fairly predictable if the fundamentals and history is a reliable guide.


AIMHO/DYOR

[mount teide] 02/7/2018 20:18

More trouble brewing for the unelected EU commission and its crumbling Federal dream!

Eurosceptic Lega soar in Italian polls after the European Union was dealt a crushing blow by Matteo Salvini, who warned Italy is ready to “ignore” the bloc’s regulations and “tear down the Brussels wall”.

“If to see our people become wealthier I will have to ignore numbers imposed by Brussels, to me those numbers will be worth less than zero."

“It was once deemed impossible to bring down the Berlin Wall."

“The next wall we will tear down will be the one of Brussels.”

Should Italians go to the polls today, 31% would choose Mr Salvini’s party while 30% would vote for his government ally, Luigi Di Maio and the M5S - giving the populist parties a staggering 61% of the vote.

The latest poll reveals a huge growth of the number of Lega’s supporters since the March 4 General Election, where the party gathered 17.4%.

[jtcod] 02/7/2018 15:46

I have always believed in the value of understanding the nature of bubbles and how the market reacts when the world is seemingly falling apart. When I started investing in 1995 I predictably read many books on the considered masters of Investment over the previous century but I also took the time to read a number of books which covered the great follies of the past and the anatomy of those bubbles. (Particularly how each bubble unwound because the unwind is not an instant thing).

More recently, like many here, I saw first hand the dot.com bubble (which thankfully I was able to avoid) and the Financial Crises of 2007/8 (which unfortunately I did not). This latter mistake came about because I was listening to what the banks were saying rather than watching what they were doing. I have spent a lot of time studying this crises from the POV and experience of the ‘big-short’ guys, to those of the Fed and the Wall Street bankers and their actions and discussions prior to the bail-out, to studying the dynamic of individual commodities through that period (particularly soft commodities) and the equity market reactions themselves. I always want to know more. Essentially I want to be able to keep my head when others are losing theirs and there is no substitute for knowledge and experience imv.

In May 2017 I started looking closely at soft commodities and I was surprised at how interesting some of these markets are. Fascinating even. There is a real human story to the production of each commodity. I eventually found myself spending 2 months exclusively researching a single soft commodity, which is unusual for me because most investment research fails rudimentary tests fairly early in the research cycle. I really got into it. I listened to the experiences of producers, understood the logistics, market controls in leading producer countries, infrastructure failings, a breakdown of payments along the production road to market and even spoke with a university professor running a research facility on behalf of the sectors end-producers so as to help others upstream. Surprisingly I found this to be the most enjoyable and rewarding research experience I have had for many years. That particular commodity isn’t the one I want to talk about here but it is responsible for kindling an interest in commodity investment.

Anyway, as I looked at commodity price dynamics through the key period of the crises - Q2 2007 to Q4 2008 - it became obvious that each commodity reaction to the crises was just as predictable as the Equity sector. If I didn’t already know the dates of the crash it was obvious to see it in the charts. .....................Obvious that is, except for one commodity.

Firstly here are the reactions of the most common commodities during that period.
(Please note that when reading from charts the figures may be a little out but you will get the picture for the purpose of this post):

BRENT OIL:
Q2 2007 $70 then a rise to $145 by Q1 2008 and fell to $35 by Q4 2008
This Oil bull run started from 2004

NATURAL GAS:
Q2 2007 $8 then rise to $13 by Q2 2008 and fell to $5.5 by Q4 2008
This Gas bull run started from 2002

GOLD:
Q2 2007 $650 then rise to $1000 by Q1 2008 and fell to $720 by Q4 2008
This Gold bull run started from 2002

SILVER:
Q2 2007 $13 then rise to $21 by Q1 2008 and fell to $9 by Q4 2008
This Silver bull run started from 2004

PLATINUM:
Q2 2007 $1300 then rise to $2250 by Q1 2008 and fell to $800 by Q4 2008
This Platinum bull run started from 2000

COPPER:
Q2 2007 $325 then rise to $410 by Q1 2008 and fell to $130 by Q4 2008
This Copper bull run started from 2002

Aluminium:
Q2 2007 $2700 then rise to $3200 by Q1 2008 and fell to $1500 by Q4 2008
This Aluminium bull run started from 2003

SUGAR:
Q2 2007 $8 then rise to $15 by Q1 2008 and fell to $11 by Q4 2008
This Sugar bull run started from 2004

WHEAT:
Q2 2007 $425 then rise to $1200 by Q1 2008 and fell to $325 by Q4 2008
This Wheat bull run started from 2001

CORN:
Q2 2007 $325 then rise to $700 by Q2 2008 and fell to $275 by Q4 2008
This Corn bull run started from 2006

COFFEE:
Q2 2007 $105 then rise to $168 by Q1 2008 and fell to $104 by Q4 2008
This Coffee bull run started from 2002

COCOA:
Q2 2007 $1900 then rise to $3300 by Q2 2008 and fell to $2000 by Q4 2008
This Cocoa bull run started from 2001

SOYBEAN:
Q2 2007 $725 then rise to $1600 by Q2 2008 and fell to $800 by Q4 2008
This Soybean bull run started from 2002

COTTON:
Q2 2007 $42 then rise to $84 by Q1 2008 and fell to $36 by Q4 2008
This Cotton bull run started from 2001

So seemingly every commodity drops in a severe financial crises. This got me thinking about what I would do in the face of a complete meltdown like the one so closely avoided in 2008. If I accept that under such circumstances everything gets hit at the ‘nadir of fear’ what would be a long term play on humanity. Food is the obvious one but then again which food would be best? I remembered reading some time earlier that phosphates was a play on all food because the world’s food supply is so reliant on fertilisers. So I looked at the Phosphates chart and saw something very odd indeed. Phosphate prices had been completely unaffected by the Worlds growing food demand. The price was flat-line dead until Q2 2007. Then miraculously it went up more than 800% without flinching in the face of the panic. Whilst all other commodities were falling off a cliff in 2008 it kept on going right up till the Fed told the other banks “Lehman’s is dead but you will be saved” through late August-Sept 2008. Then phosphates tanked.

Click on the 20yr chart here and see the flat line until Q2 2007
target='window'>hTTps://www.indexmundi.com/commodities/?commodity=rock-phosphate&months

Back in 2007 there really wasn’t that much data available on Phosphates. It wasn’t until after the spike that people pawed over ever bit of detail trying to understand what happened. They were looking at the phosphates industry but to my mind if the spike were down to a shortage bottleneck how come it wasn’t affecting phosphate prices in the same way it was affecting food supply and food price inflation up to Q2 2007 and how come it didn’t flinch when the world was going down the tubes? Many still think it was down to bottlenecks but I just do not buy that explanation. I think the reason it didn’t flinch like every other commodity price is because the spike was a long-term hedge on exactly the outcome everyone feared. I think this was probably the first mega commodity spike that was solely driven by derivatives. Earlier this year Cocoa prices spiked from a 10yr low in a more conservative fashion and that has since been accepted in the industry as having been driven by derivative contracts in the US even though the physical market is traded in London. The physical market saw no shortfalls that would sufficiently explain such movement. Believe me, the industry that relies on this produce knows exactly the position at any given moment because they employ people to actually count and monitor every single fruit on every plantation tree as it grows. The chocolate companies leave absolutely nothing to chance. My conclusion is that we now live in a new era where big commodity spikes can be driven from an office on Wall Street.

The irony of the phosphates story is that whilst bottlenecks can occur in theory, there is ample supply for humanity. It is almost limitless but I wouldn’t be surprised if the price were not played again at some opportune moment. :-)

For those interested in the phosphate sector this is an excellent paper on the subject with some views as to possible bottlenecks over that period. Whilst I do not necessarily buy into those explanations the paper is very well written and researched in all other respects imo.

[jtcod] 02/7/2018 11:35

Looking back again to the crises of 2007-08 this morning. In the aftermath nearly 9 million jobs were lost. U.S. household net worth declined by nearly $13 trillion (20%) from its Q2 2007 pre-crisis peak............my goodness it doesn't bear thinking about what would have happened had the Fed not stepped in.